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The Dose - JK Wall

Welcome to The Dose, which tackles the finances behind local health care and life sciences and points to the most interesting national analysis. Your host is J.K. Wall.

Health Care & Life Sciences / Life Science & Biotech

Supreme Court’s Obamacare ruling is a win for Republicans—they just can’t see it

June 26, 2015

The Supreme Court on Thursday preserved tax credits to help individuals buy health insurance.

If I didn’t know better, I would think Republicans would be rejoicing and Democrats would be groaning.

After all, Republican policymakers have been pushing for giving individuals tax breaks to buy health insurance since at least 1994, when Sen. Bob Dole included the idea in his counter-proposal to President Bill Clinton’s health care overhaul.

The idea was also part of George W. Bush’s platform during his first presidential campaign. Bush proposed exactly that policy in his State of the Union speech in 2007 and Sen. John McCain followed it with a similar proposal during his 2008 run for president.

Also in 2008, the late Indianapolis health insurance executive, Pat Rooney—the pioneer of health savings accounts—wrote a book that advocated for converting the current employer tax break for health benefits into one available to every individual.

Since then, offering tax credits to individuals to buy health insurance was part of the Patients’ Choice Act, offered by Republicans as an alternative to Obamacare, in 2009.

Even Rep. Paul Ryan’s plan to reform Medicare using “premium support” payments is eerily similar to how the Obamacare tax credits work.

And individual tax credits were among most of the ideas Republicans were developing in case the Supreme Court ruled against Obamacare in the King v. Burwell case on Thursday.

I don’t know whether or not Chief Justice John Roberts improperly rewrote Obamacare in order to make it constitutional, so that it should now be called “SCOTUScare”—as dissenting Justice Antonin Scalia memorably quipped. I read both Roberts’ and Scalia’s opinions and, to my untrained legal mind, each made highly persuasive arguments for its conclusion.

I also understand that, politically, President Obama and Democrats badly wanted his law upheld as is, and Republicans badly wanted to score a fatal blow against the law they hate.

But legalities and politics aside, Republicans clearly won on the policy here. Because in upholding Obamacare’s tax credits for individuals, the Supreme Court preserved what is, fundamentally, a Republican and conservative policy for health care reform.

For decades, conservative thinkers have noted that health care in America started going wrong in 1954 when Congress allowed an unlimited amount of tax deductions for employer-sponsored health insurance benefits—but gave no such tax breaks to individuals.

Obamacare’s individual tax credits are one attempt to rectify that problem. What Republicans really don’t like about Obamacare is that it wraps tax credits for health insurance—a conservative idea—in a host of new regulations and bureaucracy—a liberal idea—which they see as unnecessary, burdensome and costly.

Those regulations are things like the essential health benefits and the required levels of actuarial values for health plans sold on the Obamacare exchanges. The bureaucracy is the exchanges themselves—Republicans think tax credits should be available to anyone who buys from an insurer, whether that’s via HealthCare.gov or not. Republicans also propose tax credits that are the same amount for everyone, regardless of their incomes. Obamacare's tax credits are larger for the poorest buyers and then phase out for upper-middle-class buyers.

But the odd thing about Republican support for the King v. Burwell challenge to Obamacare is that the plaintiffs were essentially asking the justices to scrap the tax credits while keeping the regulations.

That’s the exact opposite of what Republicans really want on the policy front.

What Republicans really hoped for was that the King v. Burwell case would blow a hole in Obamacare, which would then force everyone to “start over” on health reform, as Indiana Gov. Mike Pence said in criticizing the Supreme Court’s decision on Thursday.

“The Supreme Court’s ruling in King v. Burwell is profoundly disappointing to me and every Hoosier who had hoped this ruling would give our nation the opportunity to start over on health care reform," Pence said in a statement.

The trouble was, on the eve of the Supreme Court’s decision, neither side was in a mood to compromise and neither side was in a political position to force its will on the other.

So there was a good chance that the individual insurance markets in states like Indiana would have entered death spirals, as healthy individuals skipped coverage altogether and the sick scraped together every penny for insurance that would keep paying their bills.

I can’t imagine 18 months of heart-breaking patient stories would have given Republicans—even if they were to take control of the White House and Congress in January 2017—the momentum for making individuals more responsible, not less, for buying health insurance and health care services.

My guess is a mass breakdown of the individual insurance markets would give more momentum for the policy Republicans fear most—a single-payer health system. Proponents of a single-payer system estimate the taxes needed to support it would be no more than what employers and their workers already spend on health benefits—and would have the advantage of ending the problems of the uninsured and the messy individual market.

The federal government is already massively involved in the U.S. health care system. The value of the employer tax breaks on health insurance is $250 billion each year. And the amount the federal government spends on Medicare, Medicaid, the Children’s Health insurance Plan and Obamacare subsidies totaled $836 billion per year.

That’s nearly $1.1 trillion every year of federal tax dollars that benefit private sector insurers, health care providers, drug companies and medical device makers.

Republicans fear that spending will keep growing until the federal government feels compelled to nationalize all of it or until it bankrupts the country, or both.

But contrary to popular rhetoric, Republicans and conservative think tanks have no serious plans to eliminate that spending. Rather, they want that money to be spent better—in large part by letting individuals, rather than bureaucrats and employers, decide where it goes.

“Individuals are the key decision makers in the health care system,” wrote scholars at the conservative think tank The Heritage Foundation, in an October 2014 vision for health reform. Making individuals the decision makers “would be a major departure from most current arrangements under which governments or employers determine the type and scope of health care benefits and how those benefits are financed.”

That’s what individual tax credits for buying insurance are all about. And that’s what the Supreme Court preserved on Thursday.

So that’s a win for Republicans—even if it also leaves them with lots of battles still to fight. Their hatred for all things Obamacare, however, is preventing them from seeing it that way.

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